Thursday, April 17, 2014

Wild Turkey, Betting the Farm

The gathering at Wild Turkey on Tuesday had two main purposes: to honor Master Distiller Jimmy Russell for his 60 years at the distillery, and to officially open the distillery's new visitors center (pictured above).

Russell's distillery has had many different owners in the past 60 years. For the last five, Gruppo Campari has signed his checks. Tuesday was also the debut of Jean Jacques Dubau ("call me JJ."), the new CEO and President of Campari America. ('JJ' being an attempt to head off the inevitable 'Johnny Jack.')

Campari has invested heavily in Wild Turkey, hundreds of millions of dollars worth, and the place has been transformed probably more than any other distillery in Kentucky over the same five years. Campari has built Wild Turkey a new distillery, bottling house, and now a new visitor's center. It has built several new rackhouses. It has updated the packaging for the entire Wild Turkey line and ramped up production of its bourbon and rye.

In 1954, when Jimmy Russell started at what was then the J. T. S. Brown Distillery, they filled 60 barrels a day and had about 60,000 in storage. These days, Wild Turkey fills 550 barrels a day and has about 500,000 in storage. Those are numbers usually associated with much bigger brands.

Rye production alone has increased by 500 percent since 2009, to 187,000 proof gallons per year.

Dubau said they will have their 20-year plan meeting soon, but mostly they hope to get the next five years right.

At Jimmy Russell’s insistence, the processes haven’t changed with all this growth, they've just been scaled up. For example, Wild Turkey is one of the last bourbon distilleries to make its own yeast. (Most have switched to dry yeast.) Yet even their yeast strain hasn’t been there as long as Russell. It’s just 59 years old.

The sparkling new bottling house will bottle Wild Turkey, of course, but also Campari's Skyy Vodka, a much bigger brand. Skyy is distilled in California but will be shipped to Kentucky for bottling. (Some of it was already being bottled in Kentucky, by Brown-Forman.) Campari has spent money in other places too, such as buying Forty Creek Canadian Whisky. But the investment in physical plant in Kentucky is impressive. The company is gambling big on Wild Turkey’s growth in the U.S. and everywhere else. Should they stumble, they will have a lot of excess whiskey.

But no one is looking at it that way. Both the distillery and bottling house have room to grow inside their respective buildings and there is plenty of empty space on the 800-acre site. Wild Turkey also has rackhouses near the Four Roses Distillery and at Camp Nelson in Jessamine County.
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Wild Turkey sells a little bit of two-year-old whiskey for its Australian Ready-to-Drink products, but everything else is five-and-a-half years old and older, according to Jimmy and Eddie Russell. (Most Wild Turkey products do not bear age statements.) That means none of the whiskey Campari has made has been sold yet. Whiskey is a cruel business that way, most of the cost is front-end while all of the revenue is back-end, and several years down the road at that. Crazy.

That makes it very expensive to grow, although it just got a little easier. Kentucky Governor Steve Beshear came to the festivities at Wild Turkey straight from a signing ceremony for $14 million in tax relief for Kentucky whiskey.

A note on the new limited edition Diamond Anniversary bourbon, created by Eddie Russell. It is a mixture of 13- and 16-year-old bourbons (and that is on the label). Eddie joked that Jimmy rather famously doesn't like anything older than 12-years-old. "I figured I could get away with 13," said Eddie. He used the 16-year-old to give the whiskey extra spice notes. The result tastes like a 13-year-old but with a little something extra.

The Diamond Anniversary Bourbon goes on sale next month, but only at the distillery. Suggested retail is $124.99. It will be released nationally in September.

5 comments:

Alex
said...

Thanks for the update, Chuck. You say that none of the whiskey Campari has made has been sold yet, as if they were investing all this money without any cash flow. While it may be interesting to see whether the whiskey made under Campari's ownership will taste different when it's released (I assume it won't), I assume that Campari also bought all the old stock from the previous owner. If that is true then they have continued to benefit from the same or higher sales of Wild Turkey despite not selling their own production yet.

I assume their capital investment into the infrastructure and into increasing production levels has had a great cost that will only be recouped later, but I don't find the delayed profit nature of the whiskey business more relevant here. The way I see it, unless a distiller is starting from scratch or didn't purchase the aging stocks for some reason, they should be no worse off than the previous owner of Wild Turkey. As the popularity of whiskey continues to increase, they may have to invest in putting away more stock than they sell. But in the meantime they've also expanded their product line, increasing sales and perhaps increasing profit margins, with flavored whiskeys, which continue to bring in the cash.

According to Eddie Russell, Wild Turkey Bourbon 81 proof is 5 1/2 to 6 1/2 years old, while the 101 proof is 6 1/2 to 7 1/2 years old. As for age statements, the Russell's Reserve expressions have them but most of the Wild Turkey expressions do not and I strongly doubt they're coming back.